DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE COMBINED FINANCIAL REPORT SEPTEMBER 30, 2015 AND 2014
DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT 1 - 2
COMBINED FINANCIAL STATEMENTS: Combined Statements of Financial Position 3 Combined Statements of Activities 4 Combined Statements of Cash Flows 5 - 6 Notes to Combined Financial Statements 7 - 18
SUPPLEMENTARY FINANCIAL INFORMATION: Independent Auditor's Report on Supplementary Financial Information 19 Combined Schedule of Functional Expenses 20 Schedule of Assets, Liabilities and Net Assets – The Beck Foundation of DSAET 21 Schedule of Revenues and Expenses – The Beck Foundation of DSAET 22
ESTERBRO 0 KS· SCOTT· SIGNORELLI PETERSON· SMITHSON, LTD. CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors Duluth-Superior Area Educational Television Corporation The Beck Foundation of DSAET Duluth, Minnesota
We have audited the accompanying combined financial statements of Duluth-Superior Area Educational Television Corporation and Affiliate, which comprise the combined statement of financial position as of September 30, 2015 and 2014, and the related combined statements of activities and cash flows for the years then ended, and the related notes to the combined financial statements.
Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the fmancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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302 WEST SUPERIOR STREET #200 I DULUTH, MINNESOTA 55802 I 218-727-6846 FAX: 218-720-6999 1511 TOWER AVENUE I SUPERIOR, WISCONSIN 54880 I 715-392-5101 FAX: 715-392-6600
Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Duluth-Superior Area Educational Television Corporation and Affiliate as of September 30, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Duluth, Minnesota November 24, 2015
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DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE COMBINED STATEMENTS OF FINANCIAL POSITION SEPTEMBER 30, 2015 AND 2014
ASSETS 2015 2014 CURRENT ASSETS: Cash $ 458,885 $ 130,984 Accounts receivable 293 1,710 Underwriting revenue receivable 51,201 49,250 Grants receivable 25,047 344,405 Prepaid expenses 8,471 8,180 Total current assets 543,897 534,529
PROPERTY AND EQUIPMENT: Land 13,863 13,863 Buildings 1,508,381 1,493,381 Broadcasting equipment 8,768,064 8,610,676 Office equipment 371,560 369,441 Vehicles 62,724 62,724 Total cost 10,724,592 10,550,085 Less: Accumulated depreciation (7,766,575) (7,289,675) Net property and equipment 2,958,017 3,260,410
OTHER ASSETS: Investments 12,340,182 13,393,466 Prepaid lease expense, net of amortization 48,700 55,204 Total other assets 12,388,882 13,448,670
Total assets $ 15,890,796 $ 17,243,609
LIABILITIES AND NET ASSETS 2015 2014 CURRENT LIABILITIES: Accounts payable $ 23,790 $ 20,749 Accrued expenses 102,277 109,905 Amounts held on behalf of others 14,925 14,925 Total current liabilities 140,992 145,579
NET ASSETS: Unrestricted: Available for operations 3,147,727 3,474,320 Designated for long-term investment 12,335,184 13,382,841 Total unrestricted net assets 15,482,911 16,857,161 Temporarily restricted 266,893 240,869 Total net assets 15,749,804 17,098,030
Total liabilities and net assets $ 15,890,796 $ 17,243,609
See notes to combined financial statements. -3- DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE COMBINED STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014 2015 Temporarily OPERATING Unrestricted Restricted Total REVENUE AND OTHER SUPPORT: Contributions and grants $ 1,520,773 $ 661,862 $ 2,182,635 Legacies and bequests 3,220 - 3,220 Underwriting income 235,815 - 235,815 Production and other income 9,879 - 9,879 Rental income 74,959 - 74,959 Investment income 244,469 - 244,469 In-kind income - materials and facilities 12,990 - 12,990 Net assets released from restriction 675,838 (675,838) - Total revenues and other support 2,777,943 (13,976) 2,763,967
EXPENSES: Program services - Programming and production 1,587,444 - 1,587,444 Broadcasting 909,933 - 909,933 Program information 137,629 - 137,629 Total program services 2,635,006 - 2,635,006 Supporting services - Management and general 381,261 - 381,261 Fund-raising and membership 303,394 - 303,394 Total supporting services 684,655 - 684,655 Total expenses 3,319,661 - 3,319,661
Change in net assets from operating activities (541,718) (13,976) (555,694)
NONOPERATING Contributions and grants - 83,686 83,686 Gains (losses) on investments (876,518) - (876,518) Gain on asset disposition 300 - 300 Net assets released from restriction 43,686 (43,686) -
Change in net assets from nonoperating activities (832,532) 40,000 (792,532)
Change in net assets (1,374,250) 26,024 (1,348,226) NET ASSETS: Beginning of year 16,857,161 240,869 17,098,030
End of year $ 15,482,911 $ 266,893 $ 15,749,804
2014 Temporarily Unrestricted Restricted Total
$ 1,616,589 $ 758,947 $ 2,375,536 100 - 100 237,317 - 237,317 11,885 - 11,885 76,771 - 76,771 234,894 - 234,894 12,968 - 12,968 857,037 (857,037) - 3,047,561 (98,090) 2,949,471
1,647,281 - 1,647,281 963,686 - 963,686 145,424 - 145,424 2,756,391 - 2,756,391
378,576 - 378,576 316,238 - 316,238 694,814 - 694,814 3,451,205 - 3,451,205
(403,644) (98,090) (501,734)
- 43,686 43,686 677,177 - 677,177 1,950 - 1,950 43,686 (43,686) -
722,813 - 722,813
319,169 (98,090) 221,079
16,537,992 338,959 16,876,951
$ 16,857,161 $ 240,869 $ 17,098,030
See notes to combined financial statements. -4- DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014
2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from contributions, grants, and underwriting $ 2,739,077 $ 2,637,533 Cash received from other revenues 86,255 90,578 Cash paid to employees and suppliers (2,816,024) (2,857,332) Interest and dividends received 244,469 234,894 Income taxes paid (9,813) (10,349) Net cash provided by operating activities 243,964 95,324
CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (176,815) (427,524) Proceeds from sale of investments 421,094 552,636 Purchases of investments (244,328) (234,779) Proceeds from sales of assets 300 1,950 Net cash provided by (used for) investing activities 251 (107,717)
CASH FLOWS FROM FINANCING ACTIVITIES: Grants for acquisition of property and equipment 83,686 43,686 Net cash provided by financing activities 83,686 43,686
NET INCREASE IN CASH 327,901 31,293
CASH - Beginning of year 130,984 99,691
CASH - End of year $ 458,885 $ 130,984
See notes to combined financial statements. -5- DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE COMBINED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014
2015 2014 Reconciliation of change in net assets to net cash provided by operating activities: Change in net assets $ (1,348,226) $ 221,079 Adjustments to reconcile to net cash provided: Depreciation and amortization 485,712 551,093 (Gain) on disposition of assets (300) (1,950) (Gain) loss on investments 876,518 (677,177) Grants for acquisition of property and equipment (83,686) (43,686) (Increase) decrease in: Accounts receivable 1,417 1,922 Underwriting revenue receivable (1,951) 1,983 Grants receivable 319,358 22,597 Prepaid expenses (291) 15,279 Increase (decrease) in: Accounts payable and accrued expenses (4,587) 4,184
Net cash provided by operating activities $ 243,964 $ 95,324
See notes to combined financial statements. -6- DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE NOTES TO COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 AND 2014
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES:
Organization - The Duluth-Superior Area Educational Television Corporation is a non-profit Minnesota corporation which operates non-commercial public television station WDSE-TV in Duluth, Minnesota. The financial statements include the accounts of The Beck Foundation of DSAET, a non-profit Minnesota corporation which provides financial support for WDSE- TV. All significant inter-organization accounts and transactions have been eliminated.
Basis of Presentation - The financial statements have been prepared on the accrual basis of accounting.
WDSE-TV is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. A description of the three net asset categories follows:
Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations.
Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that will be met either by actions of WDSE-TV or the passage of time.
Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by WDSE-TV. Generally, the donors of these assets permit WDSE-TV to use all or part of the income earned on related investments for general or specific purposes. At September 30, 2015 and 2014 there were no permanently restricted net assets.
Revenue Recognition – WDSE-TV reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.
Cash and Cash Equivalents - WDSE-TV considers all highly liquid investments, except for those held for long-term investment, with maturities of three months or less when purchased to be cash equivalents. At September 30, 2015 and 2014 WDSE-TV had no cash equivalents.
Accounts and Underwriting Receivables – Receivables are stated at the amount management expects to collect from outstanding balances. Based on management’s assessments of the credit history with customers and others having outstanding balances, it has concluded that realization losses on balances outstanding at the year-end will be immaterial.
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1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Property and Equipment - Expenditures for minor additions of equipment are charged to expense when incurred. Expenditures for land, buildings, major improvements and equipment additions are capitalized and recorded as additions to unrestricted net assets. Property and equipment are stated at cost, except for those assets acquired by donation, which are stated at fair value at the date of the gift. Depreciation is calculated by the straight-line method over the estimated useful lives of the depreciable assets. Depreciation recorded during the fiscal years ending September 30, 2015 and 2014 was $479,208 and $544,590, respectively.
Investments - Investments in marketable securities with readily determinable fair values and all investments in debt securities are stated at their fair values based on quoted prices in active markets (Level 1 measurements) in the statements of financial position. Certain alternative investments are stated at net asset values as determined by the investment fund (Level 3 measurements). See Note 3 for discussion on fair value measurements. The net realized and unrealized gains (losses) on investments are reflected in the statements of activities.
Pledges – WDSE-TV engages in fund-raising campaigns manifested by offering special television programs and on-air and mail fund-raising appeals. These appeals encourage supporters, both individuals and organizations, to provide financial contributions for enhancement of program offerings and other operating expenses. Financial contributions are frequently evidenced by pledges received from responding viewers. However, uncollected pledges that are not enforceable against contributors are not shown as assets on the statements of financial position. Contributions and collected pledges are components of the unrestricted operating fund inasmuch as their usage is not limited to specific activities. This usage is consistent with appeals for contributions and pledges.
Program Underwriting - Program underwriting is recorded from signed agreements. WDSE-TV considers these contributions and receivables are recorded for the full amount of the signed underwriting agreement. Program underwriting related to purchased programs is recognized as unrestricted net assets.
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1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Donated equipment - Gifts of land, buildings, and equipment are recorded as contributions at their fair value at the date of donation. Such donations are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service.
Production Revenue - WDSE-TV uses the percentage-of-completion method of accounting for independently funded production programming, whereby the cumulative production revenue earned equals the ratio of costs incurred to the estimated total costs at completion applied to the total committed revenues from outside sponsors. Production costs include charges by subcontractors plus all direct labor and other direct costs. Indirect and general and administrative expenses are charged to expense as incurred. Cost estimates on programs are reviewed periodically as the work progresses and adjustments, if needed, are reflected in the period in which the estimates are revised.
Production activities funded internally by WDSE-TV generally do not involve a contractual commitment to provide a product or service to or on behalf of a “customer” or independent funding party. Therefore, contract accounting for production costs is not generally appropriate in such circumstances. Production costs for these programs are capitalized and amortized over the expected useful lives of the programs, with the unamortized production costs shown at estimated net realizable value. At September 30, 2015 and 2014 there were no such productions that will significantly benefit future periods.
Income Taxes - WDSE-TV is exempt from income taxes, under Section 501(c)(3) of the Internal Revenue Code and similar provisions of Minnesota statutes. However, income from certain activities not directly related to WDSE-TV’s tax-exempt purpose is subject to taxation as unrelated business income. Income taxes for such unrelated business income totaled $8,450 and $8,986 in 2015 and 2014, respectively.
Uncertain Tax Positions – WDSE-TV follows the recognition requirements of uncertain tax positions as required by generally accepted accounting principles. WDSE-TV believes that is has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. WDSE-TV is generally no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2012.
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1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Reclassification - Certain amounts in the 2014 financial statements have been reclassified for comparative purposes to conform with the current year financial statements. Such reclassification had no effect on net earnings or net assets as previously reported.
Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Operations – WDSE-TV has reported its activities as operating or nonoperating. Operating activities are an integral part of the programs, services and mission of WDSE-TV. Nonoperating activities do not directly affect the programs and services of WDSE-TV such as items associated with acquisition of property and equipment and gain (loss) on investments.
Subsequent Events – In preparing these financial statements, WDSE-TV has evaluated events and transactions for potential recognition or disclosure through November 24, 2015, which is the date the financial statements were issued.
2. INVESTMENTS:
The historical cost and fair values of investments at September 30, 2015 and 2014 were as follows:
2015 2014 Cost Fair Value Cost Fair Value Money market funds $ 183,830 $ 183,830 $ 321,705 $ 321,705 U.S. Government and agency bonds and notes 473,648 499,764 619,202 652,623 Corporate bonds 882,831 882,342 716,030 712,407 Mutual bond funds 1,991,276 1,618,891 1,986,340 1,918,580 Real estate funds 1,421,965 1,267,392 1,426,203 1,425,852 Mutual stock funds 4,190,096 5,181,231 4,153,353 5,864,342 Publicly held corporate stock 1,036,415 1,712,479 1,009,059 1,724,795 Alternative investments 991,987 994,253 761,195 773,162
Totals $ 11,172,048 $ 12,340,182 $ 10,993,087 $ 13,393,466
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2. INVESTMENTS (CONTINUED):
Investment return is summarized as follows:
2015 2014
Interest and dividend income, net of custodial and advisory fees - operating $ 244,469 $ 234,894 Realized and unrealized investment gains (losses) – non-operating (876,518 ) 677,177 Total investment return $ (632,049 ) $ 912,071
Expenses related to investment income, such as custodial and advisory fees, amounted to $15,955 and $15,963 for the years ended September 30, 2015 and 2014, respectively, and have been netted against investment revenues in the accompanying statements of activities.
3. FAIR VALUE MEASUREMENTS:
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that WDSE-TV has the ability to access.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
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3. FAIR VALUE MEASUREMENTS (CONTINUED):
Fair values of assets measured on a recurring basis at September 30, 2015 and 2014 are as follows:
Fair Value Measurements Using Quoted Prices In Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) September 30, 2015 Equity securities $ 8,161,102 $ 8,161,102 $ - $ - Debt securities – U.S. Treasury/Agency 499,764 499,764 - - Other debt securities 2,501,233 2,501,233 - - Money market funds 183,830 183,830 - - Alternative investments 994,253 794,444 - 199,809
Total $ 12,340,182 $ 12,140,373 $ - $ 199,809
September 30, 2014 Equity securities $ 9,014,989 $ 9,014,989 $ - $ - Debt securities – U.S. Treasury/Agency 652,623 652,623 - - Other debt securities 2,630,987 2,630,987 - - Money market funds 321,705 321,705 - - Alternative investments 773,162 667,967 - 105,195
Total $ 13,393,466 $ 13,288,271 $ - $ 105,195
WDSE-TV used the following methods and significant assumptions to estimate fair value for assets measured and carried at fair value in the financial statements:
Alternative Investments- Certain alternative investments are valued using significant unobservable inputs since a quoted market price is unavailable. The value of these investments is determined by fund managers and valuation experts, using relevant market data.
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3. FAIR VALUE MEASUREMENTS (CONTINUED):
Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Alternative Investments
October 1, 2013 $ 393,664 Total gains and losses (realized and unrealized) included in changes in net assets (25,344 ) Purchases, sales, and settlements: Sales (263,125 )
September 30, 2014 $ 105,195 Total gains and losses (realized and unrealized) included in changes in net assets (5,386 ) Purchases, sales, and settlements: Purchases 100,000
September 30, 2015 $ 199,809
The amount of total gains or losses for the year ended September 30, 2015 included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date. $ (5,386 )
The amount of total gains or losses for the year ended September 30, 2014 included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date. $ 1,849
All assets have been valued using a market approach. There have been no changes in valuation techniques and related inputs.
4. BOARD-DESIGNATED ENDOWMENT:
Investment assets held by The Beck Foundation have been designated by the boards of WDSE-TV and the Foundation to be functioning as an endowment. None of the net assets of The Beck Foundation are classified as temporarily or permanently restricted due to the lack of any donor restrictions on those net assets. The Beck Foundation’s investment policies for endowment assets have the following goals:
(1) to preserve the purchasing power of the investment assets without putting the funds at imprudent risk,
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4. BOARD-DESIGNATED ENDOWMENT (CONTINUED):
(2) to support current and future operations of WDSE-TV through a flow of investment income, and (3) to provide long-term growth in principal through additional contributions and capital appreciation.
To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity investments to achieve its long-term return objectives within prudent risk constraints.
Duluth-Superior Area Educational Television Corporation has a policy of appropriating for distribution each year up to 5 percent of its endowment fund’s average fair value over the prior 8 quarters through September 30 preceding the fiscal year in which the distribution is planned. In establishing this policy, WDSE-TV considered the long-term expected return on its endowment. Accordingly, over the long term, WDSE-TV expects the current spending policy to allow its endowment to grow at an average of 4 percent annually. This is consistent with the WDSE-TV’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return.
Composition of and Changes in Endowment Net Assets for the Years Ended September 30, 2015 and 2014
2015 2014
Board-designated endowment net assets, beginning of year $ 13,382,841 $ 13,028,546
Investment return: Investment income 244,328 234,780 Net appreciation (depreciation) – realized and unrealized (876,518 ) 677,177
Total investment return (632,190 ) 911,957
Appropriation of endowment assets for expenditure (415,467 ) (557,662 )
Board-designated endowment net assets, end of year $ 12,335,184 $ 13,382,841
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5. PREPAID LEASE EXPENSE:
During the fiscal year ended September 30, 2003, WDSE-TV entered into a lease agreement for use of fiber cables over a 20-year period. The total required payments under the lease agreement of $130,000 were paid in full. This amount is being amortized over the life of the agreement on a straight-line basis. During the years ended September 30, 2015 and 2014 amortization expense charges against this lease were $6,504 each year. Management anticipates a charge to amortization expense of $6,504 during each of the next 7½ years.
6. RESTRICTIONS AND LIMITATIONS ON NET ASSET BALANCES:
Temporarily restricted net assets consist of the following:
2015 2014 Gifts and other unexpended revenues and gains restricted to: Future program activities $ 183,207 $ 197,183 Acquisition of property and equipment 83,686 43,686
Total $ 266,893 $ 240,869
Temporarily restricted net assets are reported in these financial statements as follows:
2015 2014 Cash $ 266,893 $ - Grants receivable - 240,869
Total $ 266,893 $ 240,869
A portion of the unrestricted net assets has been designated by the Board of Directors for specific purposes, as follows:
2015 2014 Long-term investment (primarily for capital additions) $ 12,335,184 $ 13,382,841
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7. NET ASSETS RELEASED FROM RESTRICTIONS:
The sources of net assets released from temporary donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of events specified by the donors were as follows:
2015 2014
Program expenditures $ 675,838 $ 857,038 Acquisition of property and equipment 43,686 43,686
Total $ 719,524 $ 900,724
2015 2014
Operating activities $ 675,838 $ 857,038 Non-operating activities 43,686 43,686
Total $ 719,524 $ 900,724
8. ARRANGEMENTS FOR LEASING TO OTHERS:
WDSE –TV leases transmitter equipment to customers under operating leases. Equipment cost under operating leases was $77,895 each year, respectively, and is included in broadcasting equipment in the accompanying statement of financial position. Accumulated depreciation on equipment under operating leases was $76,577 and $72,119 at September 30, 2015 and 2014, respectively. During the years ended September 30, 2015 and 2014 rental income recognized under these agreements was $74,959 and $76,771, respectively. Minimum future rentals at September 30, 2015 are as follows:
Year Ending September 30, Amount 2016 $ 65,489 2017 67,159 2018 69,066 2019 66,859 2020 66,613
9. TAX DEFERRED ANNUITY RETIREMENT PLANS:
The organization contributes to a voluntary tax-sheltered annuity plan covering participating employees meeting certain service and age requirements. Contributions to the plan of $26,272 and $24,647 were charged to operations for the years ended September 30, 2015 and 2014, respectively.
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10. CONCENTRATION OF REVENUE:
For the years ended September 30, 2015 and 2014, approximately 29% and 27% respectively, of the organization's operating revenue was provided by grants from the Corporation for Public Broadcasting, and approximately 26% and 24% respectively, was provided by the State of Minnesota.
11. CONCENTRARION OF CREDIT RISK
The organization maintains its cash balances at institutions insured by the Federal Deposit Insurance Corporation (FDIC). Total uninsured cash balances at September 30, 2015 and 2014 was $238,877 and $0, respectively. The organization has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.
12. LEASE COMMITMENTS:
Lease Site for Building - A 99-year lease was entered into on January 2, 1976 (effective February 1, 1976) between WDSE-TV and the Regents of the University of Minnesota for a building construction site on the campus of the University of Minnesota, Duluth. The lease was made in consideration of one dollar and the recognized benefit to be derived by the University from the proximity of an educational television station.
The lease contains, among other things, various significant restrictions and requirements concerning easement rights, use of the facility, potential tax assessments, and conditions of lease termination.
The lease provision relative to default of the lease covenants provides that in the event of default in any of the covenants of the lease to be kept by WDSE-TV, the University may terminate the lease by thirty days’ notice specifying such default, and if at the end of such period such default is not cured, the lease shall terminate and the University may re-enter and take possession within a reasonable time thereafter.
During the years ended September 30, 2015 and 2014, in-kind income and rental expense recognized under this agreement were $12,990 and $12,968, respectively.
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12. LEASE COMMITMENTS (CONTINUED):
Lease of Tower and Building Space – On September 2, 2008, WDSE-TV entered into a 5-year lease of tower and building space. The lessor is WDIO-TV, LLC and the tower and building are located in Hibbing, Minnesota. The lease agreement requires monthly payments which vary from $2,736 to $3,247, with adjustments annually and at the beginning of any renewal terms. The lease was renewed in 2013 for one additional period of 5 years. The lease contains, among other things, requirements and restrictions regarding insurance, easement rights, and conditions of lease termination.
Minimum future rental commitments are as follows: Year Ending September 30, Amount 2016 $ 44,935 2017 46,732 2018 44,552
13. FEDERAL GRANTS – REVERSIONARY INTERESTS:
The United States Department of Commerce has awarded WDSE-TV grants for the purchase of digital master control equipment, production equipment, and tower improvements. The federal share of the cost of these projects was $905,985. The grantor will retain a reversionary interest in the property for a period of ten years from the completion of the projects. The ten-year period will expire approximately at the end of calendar year 2019.
14. NONMONETARY TRANSACTIONS:
WDSE-TV enters into exchange transactions to provide program underwriting for operating expenses such as advertising and supplies. During the year ended September 30, 2015 and 2014, non-monetary transactions recorded as underwriting revenue and associated expenses totaled $41,050 and $44,965; respectively.
15. IMPACT OF CHANGING TECHNOLOGY:
On June 12, 2009, WDSE-TV ended analog broadcasts on channel 8 and WDSE-DT transitioned from its assigned pre-transition channel, UHF channel 38, to its assigned post- transition channel, channel 8. Transmission assets used exclusively for originating broadcasts on channel 38 having a net book value as of June 12, 2009 of $517,931 were taken out of service on that date. WDSE-TV currently holds a construction permit for operation on channel 38 that has been suspended by the FCC pending completion of the planned spectrum auction and channel repacking, and continues to hold these assets in anticipation of reuse. Should the results of the spectrum auction and subsequent repacking render such reuse infeasible, WDSE-TV would attempt to dispose of these assets. The value of these assets in the used equipment market is impossible to determine at this time due to their unique character and lack of contemporary transactions. No accrual for loss on disposition has been recorded in the accompanying financial statements. -18-
DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE
SUPPLEMENTARY FINANCIAL INFORMATION
ESTERBROOKS ·SCOTT· SIGNORELLI PETERSON· SMITHSON, LTD. CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY FINANCIAL INFORMATION
To the Boards of Directors Duluth-Superior Area Educational Television Corporation The Beck Foundation of DSAET Duluth, Minnesota
We have audited the combined financial statements of Duluth-Superior Area Educational Television Corporation and Affiliate as of and for the years ended September 30, 2015 and 2014, and have issued our report thereon dated November 24, 2015, which contained an unqualified opinion on those financial statements; appears on pages 1 and 2. Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of functional expenses for the year ended September 30, 2015 of Duluth-Superior Area Educational Television Corporation and Affiliate (pages 20), and the schedules of assets, liabilities, and net assets (page 21) and revenues and expenses (page 22) are presented for the purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole, except for certain prior-year summarized information in the schedule of functional expenses and schedules of program expenses. Such information within these schedules does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization's financial statements for the year ended September 30, 2014, from which the summarized information was derived.
Duluth, Minnesota November 24, 2015
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302 WEST SUPERIOR STREET #200 I DULUTH, MINNESOTA 55802 I 218-727-6846 FAX: 218-720-6999 1511 TOWER AVENUE I SUPERIOR, WISCONSIN 54880 I 715-392-5101 FAX: 715-392-6600 DULUTH-SUPERIOR AREA EDUCATIONAL TELEVISION CORPORATION AND AFFILIATE SCHEDULE OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED SEPTEMBER 30, 2015 WITH COMPARATIVE TOTALS FOR 2014
Program Services
Program and Program Total Program Production Broadcasting Information Services
Salaries, payroll taxes and employee benefits $ 647,847 $ 448,049 $ 64,107 $ 1,160,003 Professional services 7,149 - - 7,149 Program acquisition 476,989 - - 476,989 Program production 31,303 - - 31,303 Membership - - - - Fund-raising - - - - Advertising - - 55,394 55,394 Office and postage 35,165 24,280 9,849 69,294 Printing - - - - Insurance 32,848 23,445 3,159 59,452 Rent 5,362 44,528 516 50,406 Repairs and maintenance 9,667 115,531 930 126,128 Utilities 24,038 83,704 2,263 110,005 Travel 2,638 3,627 - 6,265 Training, dues and subscriptions 270 - - 270 Scholarships 3,525 - - 3,525 Miscellaneous 904 1,006 - 1,910 Depreciation and amortization 309,739 165,763 1,411 476,913 Income tax expense - - - -
Total Expenses $ 1,587,444 $ 909,933 $ 137,629 $ 2,635,006
Supporting Services Total Fund-raising Total Management and Supporting and General Membership Services 2015 2014
$ 275,711 $ 127,429 $ 403,140 $ 1,563,143 $ 1,583,307 9,261 4,999 14,260 21,409 23,044 - - - 476,989 514,259 - 30,008 30,008 61,311 54,339 30,436 - 30,436 30,436 35,301 5,617 119,353 124,970 124,970 129,621 - - - 55,394 57,687 13,756 5,801 19,557 88,851 95,450 - 181 181 181 - 14,152 5,968 20,120 79,572 77,476 2,310 974 3,284 53,690 53,028 4,165 1,756 5,921 132,049 119,631 10,138 4,275 14,413 124,418 132,168 305 - 305 6,570 9,454 - 94 94 364 483 - - - 3,525 3,350 717 - 717 2,627 2,528 6,243 2,556 8,799 485,712 551,093 8,450 - 8,450 8,450 8,986
$ 381,261 $ 303,394 $ 684,655 $ 3,319,661 $ 3,451,205
See independent auditors' report on supplementary financial information. -20- THE BECK FOUNDATION OF DSAET SCHEDULE OF ASSETS, LIABILITIES AND NET ASSETS SEPTEMBER 30, 2015 AND 2014
ASSETS 2015 2014
Investments $ 12,320,289 $ 13,383,057 Accrued investment income 19,893 10,409
Total assets $ 12,340,182 $ 13,393,466
LIABILITIES AND NET ASSETS
Due to WDSE-TV $ 4,998 $ 10,625
Total liabilities 4,998 10,625
Net assets - Unrestricted: Designated for long-term investment 12,335,184 13,382,841 Total net assets 12,335,184 13,382,841
Total liabilities and net assets $ 12,340,182 $ 13,393,466
See independent auditors' report on supplementary financial information. -21- THE BECK FOUNDATION OF DSAET SCHEDULE OF REVENUES AND EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014
2015 2014 REVENUE: Interest $ 38,553 $ 31,760 Dividends 221,730 218,983 Net gains (losses) on investments (876,518) 677,177 Total revenues (616,235) 927,920
EXPENSES: Program services Grants to Duluth-Superior Area Educational Television Corporation 410,468 552,636 410,468 552,636 Management and general - Investment fees 15,955 15,963 Professional services 4,999 5,001 Conferences, travel, training - 25 20,954 20,989
Total expenses 431,422 573,625
Change in net assets (1,047,657) 354,295
NET ASSETS, Beginning of year 13,382,841 13,028,546
NET ASSETS, End of year $ 12,335,184 $ 13,382,841
See independent auditors' report on supplementary financial information. -22-